December's Pre-Budget Report was a careful balancing act between assuring the markets that the Government was behaving responsibly and not upsetting too many voters in the run-up to the general election. The Chancellor, Alistair Darling, also felt he needed to avoid hampering the fragile economic recovery.

How well he has succeeded remains to be seen. The main tax increases and spending cuts are yet o come; this was just the start.

The headlines focused on the 50% payroll tax imposed on banks that pay bonuses of more than £25,000; the extra tax charge will not fall directly on the bank employees themselves. The Chancellor has also frozen all the main tax rates and allownaces for 2010/11. However, the rate freeze is welcome news for small businesses; the planned 1% increase in the small companys corporation tax rate from 21% to 22% is now delayed until 2011.

People with high incomes will be hit by the new 50% income tax in 'super rate' on incomes over £150,000 already announced for 2010/11. From 6th April 2011 higher rate tax relief for pension contributions is to be restricted for those with 'relevant income' over £150,000 and the Government has now set out the way in which this will work.

In the meantime, the special anti-forestalling rules that prevent people form getting higher rate tax relief on large additional contributions to their pensions before the change have been extended to those with incomes of £130,000 or over.

National insurance contributions are due to rise sharply in 2011/12. Employers, pemployees and self employed people will each pay an extra 1%. The good news is that the primary threshold and lower profits limits will be raised to compensate lower income earners. Some other key measures announced by the Chancellor where:

• Research and development (R&D)

From 9th December 2009 it has no longer been a requirement for SMEs to own the intellectual property derived from their R&D expenditure. This will enable more companies to claim the relief.

• Business rates:

Businesses that have empty buildings with a rateable value below £18,000 will be exempt from business tax until 2011.

• Basic state pension:

The basic state pension will rise by 2.5% in April to £97.65 per week for a single person and £156.15 a week for married couples and civil parners.

• Inheritance tax:

The nil rate band was frozen at £325,000, even though an increase to £350,000 had been announced.

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